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Are we in for a robust economy?

Robust not only in the sense of a growing GDP, but in the sense of rapid job creation? The WSJ’s Outlook column today seems to be projecting that very thing.

“Firms were unusually aggressive in cutting costs and cutting employment,” said James O’Sullivan, an economist with UBS. “The flip side of that remains to be seen, but it could mean that companies will be quicker to bring back people because they were more aggressive about getting rid of them.”

… To be sure, even as more companies begin to hire as the economy recovers, it could take years before payrolls reach their prerecession level. With Americans spending more cautiously in response to the massive losses in wealth associated with this recession, some jobs may simply never come back.

That said, one thing different about this recession — and one more reason the job market may come back more quickly than in the downturns of 2001 and 1990-91 — is that so many of the job losses have been at the service-related companies that have come to dominate U.S employment. Since the recession began, 3.3 million service-sector jobs have been lost, a 2.9% decline that is the largest in data going back to 1939. In comparison, the previous two recessions each saw service-sector jobs fall by 0.5%. …

But the biggest reason jobs might bounce back quicker from this downturn than the past two recessions, said Comerica Bank economist Dana Johnson, is that the economy looks likely to see a much bigger bounce as it recovers.

Gross domestic product — the value of all goods and services produced by the economy — has fallen by 3.9% since economic output peaked last year, marking the steepest decline since the end of World War II. In contrast, the 2001 and 1990-91 recessions were among the shallowest on record.

History says that given the depth of the downturn, GDP should grow at a 6% to 8% rate over the next year, according to Mr. Johnson. But because of the financial stress that has come with this recession, he expects it will grow at a 4% rate.

Corroborating that notion, the Journal this morning carried stories that car sales have been very strong in both India and China over the last six months. In fact, General Motors set a new monthly sales record in China in July.